One component of the PPACA (aka Obamacare) provides for the creation of health insurance exchanges
in each state in which consumers may purchase health insurance. The
PPACA’s supporters anticipated that every state would create its own
exchange, and the law provides for tax credits and subsidies for the
purchase of qualifying health insurance plans in state-run exchanges.
Yet as Michael Cannon and I pointed out
the PPACA does not authorize tax credits and subsidies in exchanges run
by the federal government. This is a potential problem because at least
twenty states are refusing to create their own exchanges and are
defaulting to the federal option. In response, the IRS issued a rule to
authorize tax credits and subsidies in federal exchanges. The only
problem, as Cannon and I explain at length in a forthcoming article in Health Matrix, the IRS rule is illegal. Now the rule is being challenged in court by Oklahoma in a suit legal analyst Stuart Taylor calls “by far the broadest and potentially most damaging of the legal challenges” to PPACA implementation, and more suits are likely.

The IRS defends its rule, but has had difficulty providing much by
way of justification beyond vague references to congressional intent.
Now comes my friend Samuel Bagenstos, at his Disability Law blog and Balkinization,
arguing that Cannon and my arguments are “nonsensical” and “deeply
legally flawed.” Bagenstos is a serious scholar, and his arguments are
clever, but they do not sustain the case for the IRS rule.

Bagenstos’ central argument is similar one advanced by Tim Jost on the Health Affairs blog (and to which Cannon and I responded here).
Essentially he argues that the PPACA makes federal fallback exchanges
the legal equivalent of state-run exchanges and therefore any tax
credits or subsidies authorized in the latter must be available in the
former as well.

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Comments

Alder's legal reasoning may be correct, but ObamaCare was not upheld on the basis of legal reasoning. It was upheld on a political calculation, with 5 Justices rewriting the law to fit a tortured rationalization.

Given that history, the Oklahoma case is doomed no matter how solid its legal reasoning may be.